Pushed to the limit

The dramatic events of September and early October saw the global financial crisis hit a new nadir, presenting banks with a scenario most had thought unthinkable even a few months ago. With regulators citing stress testing as a key means of predicting extreme events, banks are finally focusing more attention on this area. Rob Davies reports

Five years ago this month, Risk published an article asking what would be the consequences of a major dealer exiting the derivatives market (Risk November 2003, pages 26-28). At the time, the scenario was considered so unlikely that only a few firms - including JP Morgan and Deutsche Bank - were stress testing the possibility of such an event happening.

The scale of losses experienced by financial institutions since the credit crisis began in the second half of 2007 has sharply brought into